Responding to cash flow shortfalls

As your business grows, you will need to find money to pay for more staff, bigger facilities and increased production costs. If your business grows rapidly and the growth is largely unplanned, you'll risk overtrading by not having enough working capital (cash for day-to-day expenses) to fulfil your expanding orders.

Not having enough working capital in the critical time between investing in growth and realising the profits is a common problem for businesses experiencing rapid expansion. It can easily ruin a business. However, there are a number of strategies for dealing with short-term cash shortfalls.

Dealing with cash shortages

There are a number of immediate ways to fund unexpected cash shortages, including:

collecting outstanding debts

increasing prices

borrowing money - for example, by refinancing or arranging an overdraft

Monitor and forecast cash flow

To improve your cash flow in the longer term, however, your business will need to better manage its cash flow, particularly if you are planning further expansion.

By monitoring and forecasting your cash inflows and outflows, you can better predict cash flow shortfalls and organise debt finance ahead of time if necessary. With adequate working capital in order, you'll then have more time to manage other aspects of your rapidly expanding business.